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Water markets and trade

Water trading has become a vital business tool for many irrigators, providing flexibility to respond to variable water availability.

Water markets allow water to flow to where it can be used most productively. This is particularly valuable as different users have to manage the water demands of annual crops and permanent plantings.

The water markets in the basin are based on a 'cap and trade' system where the cap represents the total pool of water available for consumptive use. Available water is distributed to users via water rights administered by the basin states. There are two main types of rights traded in the basin-entitlements and allocations:

Water access entitlements are rights to an ongoing share of the total amount of water available in a system.

Water allocations are the actual amount of water available under water access entitlements in a given season.

Boom spray irrigation of wheat near Hay, New South Wales. Photo by Arthur Mostead.

During the year, water is distributed or 'allocated' against entitlements by state governments in response to factors such as changes in rainfall and storages. This provides people with certainty as to the water they will receive, while allowing states to manage water availability through different climactic conditions.

permanent trade is the trade of water entitlements, known as entitlement trade

temporary trade is the trade of water allocations, known as allocation trade.

Users determine whether they need to buy or sell their water at a particular time. The price of water is a reflection of these demand and supply factors. The price of water differs across regions, type of water rights and time. More information is available in the water markets in the Murray-Darling Basin brochure.

Water allocation

The amount of water available for users in a year varies according to rainfall, inflows into storages and how water in storage is managed by the Basin states.

At the start of each water year (1 July), each Basin state makes water allocation announcements based on seasonal availability.
In regulated river systems, allocations are reviewed throughout the year. If water conditions and storage levels improve, the allocation can be increased if it is less than 100%.

Seasonal flows are the basis for allocations in unregulated systems. Once predetermined flow conditions are met, water may be taken. Extraction of water is limited by placing restrictions on maximum daily extraction, and the timing of extractions.
More information is available on state websites:

Water trading rules

There are a number of sets of rules regulating water trade in the Basin. These rules all operate together to ensure the continued development and operation of the water market.

Basin Plan water trading rules

The Basin Plan water trading rules came into effect on 1 July 2014. The rules introduced a common framework for water trade, which aims to allow the water market to operate more efficiently and effectively.
They deal with various aspects of the trade of surface water and groundwater rights in the Basin, including:

Creating opportunities to trade within and between Basin states through the removal of trade barriers

Enabling the development of compatible entitlement, regulatory and other arrangements across Basin states

Providing appropriate protection of third parties

Facilitating good information flows into the markets through the publication of trade rules and product information.

The Australian Competition and Consumer Commission (ACCC) water market and charge rules

The ACCC has monitoring, enforcement, advisory and, in some cases price-setting roles, for the water market rules and water charge rules. The Commonwealth Water Minister under the Water Act makes these rules.

Irrigation infrastructure operator (IIO) rules

The IIOs create and maintain trading rules within their irrigation network. These rules ensure the operation, maintenance and accounting of trades that occur within their networks. An IIO owns or operates water service infrastructure for delivering water for the primary purpose of irrigation.